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Robert Higgs: Government-caused Uncertainty Continues to Depress Jobs

Saturday January 29th, 2011   •   Posted by David Theroux at 11:49am PST   •  

In his recent article in Investor’s Business Daily, “Uncertainty Continues To Depress Jobs,” Robert Higgs (Senior Fellow, The Independent Institute) discusses how the U.S. government’s interventionist and spending policies are prolonging high unemployment by creating a climate of massive economic uncertainty:

President Obama, in his State of the Union address, promised to focus on job-creation this year. But robust new hiring is unlikely when so much uncertainty — created by the same White House now promising jobs — hangs over the economy.

Although the unemployment rate fell to 9.4% in December from 9.8% in November, some 14.5 million people are still classified as unemployed by the Bureau of Labor Statistics, just 1.1 million fewer than in October 2009, when unemployment hit its peak.

Put in perspective, the current number of unemployed is some 5.2 million, or 56%, greater than the number in June 2003, when unemployment hit its peak after the dot-com bust.

Even if the recovery continues along its current track, some six more years will be needed to bring the job total back to where it was November 2007, when some 146.6 million people were employed in the U.S.

In this event, the U.S. economy will have gone nine years without any net increase in jobs. Some economists are comparing this employment drought to the Great Depression, when employment remained below its 1929 level for 11 years in a row.

To be sure, employment is always a lagging indicator during the ups and downs of the business cycle. Yet, new private-sector jobs have been extraordinarily few during the present recovery, and current economic conditions portend no great pickup in the foreseeable future.

Employment reached its most recent peak more than three years ago, in November 2007. It then started to fall, reaching its low point in December 2009, when only 138 million people had jobs. In the year since, employment has risen by only 1.25 million, or less than 1%.

Meanwhile, millions of people have withdrawn from the labor market during the past three years. In January 2007, 66.4% of the civilian population aged 16 and over were in the labor force; in December 2010, only 64.3% were officially classified as employed or actively seeking employment.

Of the people not in the labor force, an estimated 4.7 million would seek work if they believed they might find a job. If these individuals were considered unemployed, along with those actively seeking work, the official unemployment rate would be more than 12% today.

As if the foregoing data were not sufficiently discouraging, data on the division of employment between government and the private sector tell an even sadder story.

Between November 2007 and December 2009, some 8.5 million private-sector jobs disappeared in nonagricultural industries. By December 2010, only 1.8 million of those lost jobs had been regained, leaving a net loss of 6.7 million jobs.

In stark contrast, government employment during the same period hardly changed. In November 2007, almost 21 million civilians were employed by government at all levels, and in December 2010 about 20.8 million had government jobs. Government employment was even greater during much of that period, hitting 21.5 million at its peak in October 2008.

For the full article, please click here.

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January 2011